Most importantly, the death of the Liberals has given the
Conservatives a whole new political life. (We'll tell you what
that means for policy in the UK below.)

Labour crushed, and the party leader resigns

In addition — and most significantly in terms of UK politics —
the Labour Party suffered a swingeing defeat. The UK's second
biggest political force, which had remade itself from its
socialist roots into a modern, (lowercase-"L") liberal force over
the last 30 years, is now boxed into the North of England with no
obvious way of winning enough seats in the South or Scotland to
form a government in the foreseeable future.

Ed Miliband resigned as Labour leader on Friday, after his party
suffered a massive defeat to Prime Minister David Cameron's
Conservatives.

In a speech from Labour headquarters in central London, Miliband
apologised for not succeeding.

Labour was decimated in Scotland by a swing to the Scottish
National Party (SNP) and in England by a surprise surge from the
Tories.

"The responsibility for the election result is my own," Miliband
said in a statement Friday morning, after his senior team
resigned.

"This has clearly been a very difficult and disappointing night
for the Labour party," Miliband said Thursday, after holding onto
his own constituency seat in Doncaster North. He attributed major
losses in Scotland to a "surge of nationalism."

A party that can now fit into a minibus

Having outdone expectations in
2010, the Lib Dem party is currently on course to lose more seats
than pretty much any pollsters or analysts had suggested, and
they may be left with fewer seats than at any time since the
party was founded.

They are on course to lose more seats than pretty much any
pollsters or analysts had suggested, and they may be left with
fewer seats than at any time since the party was founded.

Forecasts suggested the Lib Dems might lose half of their 57
MPs — but the results suggest they could even go down to
fewer than 10. Lib Dem leader Nick Clegg has survived, but he now
leads a party that is a shell of its former self. In one seat,
Castle Point, the candidate got 0.2% of the votes, the worst for
a Liberal in any constituency in 150 years.

What's left of the party is a mess, with most of its leadership
swept away in the bloodbath. Three of the five Lib Dem cabinet
ministers — Vince Cable, Ed Davey, and Danny Alexander — were all
defeated, along with many other ministers.

One obvious leadership candidate, Tim Farron, held on to his seat
with a solid majority. But the prospect of leading a party that
can now fit into a minibus is probably not as inviting as it
previously was. Other possible contenders are Norman Lamb, the MP
for North Norfolk, and Alistair Carmichael, Scotland's only
remaining Lib Dem MP.

Not a minor setback

The Lib Dems already saw a similarly awful result in the European
elections last year, when the party lost 10 of its 11 members of
the European parliament.

This isn't a minor setback. The Lib Dems have won seats in the
past by building up local government bases over years and
decades, and then using that local knowledge and recognition to
campaign for parliament. After five years of constant, repetitive
defeat, the party's council base is depleted, and it might face a
period in the wilderness as in the decades that the Liberal Party
experienced in the mid-20th century.

There's a pretty obvious international comparison to be made.
During her second term in office, Angela Merkel went into
coalition with the liberal Free Democratic Party (FDP), which got
one of its best election results ever in 2009. By 2013, it was
reduced to a husk, getting less than 5% of the vote and no
representation in parliament at all.

Here is what to
expect from Prime Minister David Cameron in the next five
years:

Britain's Prime Minister
David Cameron addresses after winning his seat at the counting
centre for his local constituency as ballots are tallied in
Britain's general election, in Witney, Britain May 8,
2015.REUTERS/Toby
Melville

Here's what you should be expecting from a Conservative majority
government (or something very close to one) over the next few
years.

An EU referendum — and maybe another on Scottish independence

With a majority, David Cameron would almost certainly legislate
for a referendum on the UK's membership of the European Union —
something that the Labour party and Lib Dems were against. They'd
initially proposed having the vote in 2017, but there have also
been suggestions that it should be pushed earlier.

Here's Barclays' note on Friday:

Markets will also have to process the holding of an in/out EU
referendum by 2017, an event that is likely to generate a
substantial amount of uncertainty, particularly if polls fail to
show more substantial support for EU membership in the coming
weeks and months. As such, initial short-term cheer could be
followed by a medium-term downside chill.

What's more, with the Scottish National Party (SNP) storming home
and winning almost every seat in the country, the
pro-independence movement will get a new lease of life — but
likely no influence at all in the government
at Westminster. It's quite possible that the SNP will try to use
this result as a springboard for another referendum.

More cuts, in uncertain places and with few tax hikes

The Conservative fiscal plans are tighter than the other parties'
were — with fewer increases in tax and more departmental spending
cuts. Here's HSBC's note on the results:

Over the next five years, the Conservatives are planning
substantial fiscal tightening: according to the Institute for
Fiscal Studies’ (IFS) analysis, the party’s stated aims are
consistent with a reduction in borrowing equal to 5.2% of GDP by
2020. The IFS estimate that, under the Conservative’s, public
spending could be around GBP45bn (in today’s prices) lower by
2020 than it might have been under Labour.

However, while the Conservatives’ manifesto plans were the most
stringent, they were not particularly detailed. The party has
said that it wants to implement GBP30bn worth of tightening by
2018/19: GBP12bn in welfare spending cuts, GBP13bn in
departmental spending cuts and GBP5bn in savings from clamping
down on tax avoidance / evasion.

Chancellor George Osborne might have
actually wanted a coalition in these
circumstances, making it easier to ditch policies like welfare
cuts that are popular, but hard to actually find. Here's how the
Tory plans look against those of the other parties:

No Mansion Tax

Both the Liberal Democrats and Labour favoured some sort of
higher taxes on particularly expensive properties — the impact of
which would have been most keenly felt in London.

There might have been a bit of restraint in the most pricey parts
of the housing market, with the expectation that some version of
the tax might come in.

It's now almost certain not to. Here's HSBC again:

However, markets will also have to process the holding of an
in/out EU referendum by 2017, an event that is likely to generate
a substantial amount of uncertainty, particularly if polls fail
to show more substantial support for EU membership in the coming
weeks and months. As such, initial short-term cheer could be
followed by a medium-term downside chill.